TaxTMI 
TaxTMI 
2012 (1) TMI 241
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....h expenses. 2) Whether on the facts and in circumstances of the case the Ld. CIT(A) was justified in holding that under section 153A, expenses not recorded in the books of account or not noted in seized material can be allowed on presumptive basis. 3) Whether on the facts and in the circumstances of the case the Ld. CIT(A) was justified in directing the AO to tax the "on money" receipts and advances in the year of transfer of shops instead of in the year of receipt of the money. 4) Whether on the facts and in the circumstances of the case the ld. CIT(A) was justified in relying on the decision of the Tribunal in the case of Golani Bros Vs. ACIT 75 ITD 1 ignoring the fact that the facts of the present case and that of the Golani Bros are not identical and the decision of the Tribunal is under litigation before the High Court, Bombay. A.Y. 2003-04 1) Whether on the facts and in the circumstances of the case the Ld. CIT(A) was justified in deleting the addition of Rs. 9,93,000/- on a/c of advances and Rs. 3,00,000/- on account of on-money during the transfer of shops directing the A.O. that the advances should be taxed in the year of transfer and not in the year of rece....
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....ether on the facts and in the circumstances of the case the Ld. CIT(A) was justified in relying on the decision of the Tribunal in the case of Golani Bros Vs. ACIT 75 ITD 1 ignoring the fact that the facts of the present case and that of the Golani Bros are not identical and the decision of the Tribunal is under litigation before the High Court, Bombay. 3) Whether on the facts and in the circumstances of the case the ld. CIT(A) was justified in deleting the addition of Rs. 45,600/- on a/c of disallowance of watchman's salary and of Rs. 40,150/- on account of supervision charges and Rs. 8,804/- on account of disallowance of dismantling expenses which were not supported by any evidence or seized material holding that expenses not recorded in the books of account or not noted in seized material can be allowed on presumptive basis. 4) Whether on the facts and in the circumstances of the case the Ld. CIT(A) was justified in restricting the addition u/s 69C from Rs. 2,14,663/- to Rs. 1,72,663/-, allowing relief of Rs. 42,000/- ignoring the fact that source of such expenditure was unexplained and would be deemed to be the income of the assessee for the relevant financial year as is ....
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.... in para nos. 3 to 35 of the first appellate order are as under : "3. Brief facts of the case are that search and seizure action was conducted against the Agrawal group at Chalisgaon onI 03/11/2004. The appellant is a partnership firm engaged in the business of builders and contractors for construction work. During the course of action u/s.132 diaries were seized at Annexure A-I to A-3 containing notings in respect of business transactions of the appellant firm in respect of amounts received by Agrawal Group from customers of the two municipal development projects undertaken by M/s.Tejas Constructions at S.No.4016 and F.P.48 of Chalisgaon. The notings in seized diaries revealed that the cash received from the customers of shop at the said projects at C.S.No.4016 and F.P. 48 Chalisgaon was to the tune of Rs. 10,25,000/- and Rs. 75,48,OOO/- respectively totalling to Rs..85,73,OOO/-. Further advances received from the said projects noted in the diaries from project at FP 48 and S.No. 4016 were to the tune of Rs. 33,28,000/- and Rs. 32,54,000/- respectively, totalling to Rs. 65,82,000/-. The partners of the appellant firm therefore declared additional income of Rs. 85,00,000/- to co....
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....00 65,000 0 1,95,000 1,75,000 a 4,45,000 Net Cash Receipts (A+B-C) 3,01,000 4,65,000 5,15,000 35,33,000 44,76,000 54,20,000 1,47,10,000 3.2 The appellant firm and it's sister concern Sitamai Agro Farms have received premium on sale of plots Rs. 15,30,744/- as under: Asst. Year. M/s.Teias Constructions Sitamai Altro Farms 2003-2004 4,03,230 0 2004*2005 1,38,900 803114 2005-2006 1,85.500 0 Total 7,27,630 8,03,114 3.3 While assessing unrecorded premium on sale of plots the A.O. has allowed expenditure on account of commission on sale at 2% and disallowed all the other expenses claimed by the appellant. The details of the same are as under: A.Y. Premium Commission 2% Addition 2005-06 1,85.500 3,710 1,81,790 2004*05 1.38.900 2.778 1,36,122 2003-04 4.03.230 8.065 395.165 TOTAL 7,27,630 14553 7,13,077 3.4 The appellant firm has offered to tax unrecorded premium money received in respect of sale of shops and plots in the year ....
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.... -4156254 -968279 -36430 - - - - -6160963 Expenses allowed by the A.O.(-) "** -408083 -232550 - -249000 - - . -889633 Income assessed 12866636 10563138 9881930 8368044 9219372 7133930 47852224 62818274 * Other Addition in A.Y.1999-2000 Disallowance u/s.40A(3) Rs. 10,688/- Credit Notes not accounted Rs. 9,202/- Rs. 19,890/- ** Expenses allowed by the A.O.(-) Particulars A.Y. 2005-2006 A.Y. 2004-2005 A.Y. 2002-2003 Commission 3,13,233 93,000 -- Supervision Charges 94,850 1,39,530 -- Dismantling Exps. -- -- 2,49,000 Total 4,08,083 2,32,530 2,49,000 6. We find that the A.O has taxed the unrecorded premium in the year of receipt. The Ld CIT(A) while deciding the issue of receipt of 'on money" has held that the consi....
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.... a consideration received in respect of proposed sale of shops cannot be taxed in the year of its receipt ignoring the amount of expenditure incurred and to be incurred in respect of construction of shops and other business expenses. The ld. A.R. argued that different treatment can not be given to the on money receipt than the advances received from customers against proposed sale of shops which are recorded in the books for the purpose of recognizing revenue. The assessee has recognized the receipt of on money in the year of transfer of shops and handing over its possession to the customers. In this regard, above decisions have been cited by the ld A.R. The A.O has taxed the receipt of 'on money' in respect of shops sold in the year of receipt itself. In its remand report, the A.O has contended that there is no established law for giving the above treatment to the 'on money' received during the course of sales of shop, as chosen by the assessee. The Ld CIT(A), has accepted the contentions of the assessee in view of the above cited decision of Pune Bench in the cases of Golani Bros. Vs. ACIT (Supra) and Dhanvarsha Builders & Developers (P) Ltd. Vs. DCIT (Supra ). 11. Having gone....
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.... followed by the assessee. In other words, method of recognizing revenue is to be considered for taxing the amounts received in cash as well as amounts received by way of cheques. The Pune Bench of the Tribunal in the cases of Pradeep Ashok Raheja Vs/ ACIT (Supra) and M/s. Ranade Dighe and Associates Vs. ITO (Supra) has followed its earlier decision in the case of Shri. D.J. Hanswani, ITA Nos. 894/PN/97, 453/PN/98 and C.O No. 17/PN/99, order dated 29.6.2005. Relevant para No. 3.1 of the order of the Tribunal in the case of Shri D.J. Hanswani is being reproduced for ready reference : "3.1. We have considered the facts of the case and rival submissions. On perusal of the facts of this year, we find that the assessee has been accounting for profits on sale basis and not on project completed basis as mentioned in the "Statement of Fact" filed by the revenue. This is quite clear that from summary of projects filed by the learned counsel, which given the details of sale. It may be mentioned here that the sales started from the previous year relevant to A.Y. 1994-95 though the project was initialed in the previous year relevant to A.Y 1993-94. The learned DR had sought to argue that th....
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....hod of accounting regularly employed by the assessee. Under the law as it applies to assessment prior to A.Y. 1997 98, an assessee can follow either (a) the cash system of accounting or (b) mercantile system of accounting or (c) mixed or hybrid system of accounting. An assessee may have different sources of income which is chargeable to tax under the head 'income from business or profession' or 'income from other sources'. For example an assessee may be doing (a) manufacturing and sale of cements (b) dealing in shares and securities as trader and (c) acting as commission agent. He was free to follow either of the three recognized system of accounting for each of the above sources. When computation of 'income under the head income from business or profession' is made, the income from various source under the said heads are merely aggregated. In doing so, there cay be no method of accounting; therefore section 145 when it refers to 'income chargeable under the head 'profits and gains of business or profession or 'income from other sources' it refers to income arising from a particular source. Income arises out of a particular source and not out of a particular head of income. Section....
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.... 17. In support of the ground, the Ld. D.R. has basically placed reliance on the assessment order. The Ld. A.R., on the other hand, has reiterated the submissions made before the authorities below. 18. Having gone through the above cited decision of Delhi Bench of the Tribunal in the case of Shivnath Rai Harnarayanan (India) Ltd. Vs. DCIT (Supra), we find that the Delhi Bench in that case on an identical issue has held that no income which was already subjected to assessment u/s. 143(3) or u/s. 143(3)/147 of the Act completed prior to search in respect of those assessment years referred to Section 153A, 153B of the Act and second proviso to Section 153A, had been included in the assessment framed u/s. 153A of the Act. The Tribunal justified such action of the A.O in framing the assessment u/s. 153A of the Act for the A.Ys. under consideration. The memorandum of accompanying Finance Bill 2003 has also explained as "assessment or re-assessment, if any, relating to any A.Y. falling within the period of 6 A.Ys. containing the date of initiation of the search u/s. 132 or requisition u/s. 132A as the case may be shall abet". Similar view has also been expressed by the Pune Bench of....
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.... 2002-03. 21. As discussed above, we find that the first appellate order on the issue of disallowance of dismantling expenses is reasoned one, hence we are not inclined to interfere therewith. The same is upheld. The issue no. 1 in A.Y. 2002-03 and issue no. 3 in A.Y. 2004-05 relating to the deletion of addition of Rs. 2,49,000/- and Rs. 19,954/- respectively made on account of dismantling expenses are decided against the revenue. First appellate order in this regard is upheld. Commission Expenses 22. The relevant facts are that the assessee claimed to have paid commission to the following persons for sale of shops and also for recovering the amount of sale proceeds from customers : Name of the Payee A.Y. 05-06 A.Y. 04-05 A.Y. 03-04 Total K.B. Chhajed 4,60,000 4,00,000 2,30,000 10,90,000 M.L. Shirude 1,00,000 90,000 - 1,90,000 R.B. Deshmukh 90,000 75,000 - 1,65,000 Prashant Yeola 95,000 80,000 - 1,75,000 Others - - 12,000 12,000 Total 7,45,000 6,45,000 2,42,000 16,32,000 The A.O. partly allowed....
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....e that 55% of the salary claimed by the assessee in A.Ys. 2004-05 and 2003-04 on account of salary/commission expenditure paid to Shri K.B. Chhajed. The Ld CIT(A) has upheld the balance disallowance of commission amounting to Rs. 8,92,194/-. The first appellate order on the issue as discussed above in reasoned one, hence we are not inclined to interfere therewith. The same is upheld. Issue no. 3 in A.Y. 2003-04 & 2004-05 relating to commissioner payment is thus decided against the revenue. Watchmen salary 25. So far as disallowance of watchmen salary by the A.O at Rs. 1,24,800/- in the A.Y. 2003-04, Rs. 1,53,600/- in A.Y. 2004-05 and Rs. 45,600/- in A.Y. 2005-06 is concerned, we find that the assessee had submitted affidavits of watchmen supporting payments to them before the A.O. The assessee had also submitted that the firm had not claimed any expenditure towards salary paid to watchmen in regular business of account maintained as the said salary was paid out of the premium amount received. It was submitted that salary to watchmen in respect of each site is must in the line of business of builders and developers. It was also pointed out that no expenditure towards salary to....
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..... up-to the date i.e. 3.11.2004. 31. The assessee contended before the Ld CIT(A) that the expenditure has been worked out by the A.O. on the basis of receipt of on money up to date of search and not per month basis and hence the disallowance made by the A.O. is unjustified. The Ld CIT(A) found the contention of the assessee in respect of A.Y. 2005-06 as correct and hence accepted. He has accordingly directed deletion of disallowance of supervision charges amounting to Rs. 40,150/- in respect of A.Y. 2005-06 and has upheld the disallowance of Rs. 10,470/- in respect of A.Y. 2004-05. 32. We find that the first appellate order on the issue, as discussed above, is reasoned one and thus no interference thereto is called for. The same is upheld. Issue no. 3 relating to supervision charges raised in A.Y. 2005-06 is thus decided against the revenue. RESTRICTING/REDUCING OF ADDITION 33. So far as restricting of addition made u/s/. 69 C by the Ld CIT(A) during A.Y. 2005- 06 is concerned, we find that the A.O had made following additions : Seized Material Referred Amount Remark A.Y.2005-2006 2,14,663 Annexure B-51 Loose paper bundle Papers 1 to 18....